Shopify Investor Relations and Financial Results

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Internet, Everywhere–(Newsfile Corp. – February 16, 2022) – Shopify Inc. (NYSE, TSX: SHOP), a provider of essential internet infrastructure for commerce, announced today strong financial results for the quarter ended December 31, 2021.

Harley Finkelstein (Shopify President) said that the last two years were “exceptional”. Shopify President Harley Finkelstein said that revenue nearly tripled, GMV more than doubled, and the Shopify team has nearly doubled the number of merchants who use Shopify. The Shopify platform is almost twice as popular as 2019. The acceleration into digital commerce has allowed us to go further faster for both merchants and buyers, and we are coming out of the sprint of the last two years stronger and more ambitious. We are the commerce engine for independent brands that want to establish a direct relationship with their customers and sell anywhere, regardless of whether they’re on mobile or Main Street. With the unique mix of top talent, merchants and ecosystem we have, we’re excited to see what we can create in 2022.

Shopify’s Chief Financial Officer Amy Shapero stated that “Our merchants had an amazing holiday selling season which drove Shopify’s strong fourth quarter results.” She also said that Shopify’s collective sales grew significantly faster than the rest of the ecommerce sector over the Black Friday Cyber Monday weekend. Our focus on the long-term means merchants have the best commerce technology available, giving them the ability to compete internationally while still focusing on the things that matter most to them: their products and customers. We will continue to make commerce more accessible for entrepreneurs in 2022 by building high-performing infrastructure and innovative features. This combination creates a strong and trusted commerce solution that benefits Shopify over the long-term and future-proofs merchants.

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Fourth-Quarter Financial Highlights

  • The fourth quarter’s total revenue was $1,380.0 millions, which is 41% more than the comparable quarter in 2020.
  • Subscription Solutions revenue increased 26% year-over-year to $351.2 million mainly due to the addition of more merchants to the platform.
  • Merchant Solutions revenue reached $1,028.8million, an increase of 47% year-over-year, mainly due to the growth in Gross Merchandise Vol (1 “GMV”), which exceeded $1 billion for the first quarter.
  • The Monthly Recurring Revenue 2 (“MRR”) was $102.0 Million as of December 31, 2021, exceeding $100 million for first time. MRR rose 23% from $82.6 million to December 31, 2020, as more merchants joined the platform. Additionally, the number of retail locations that use POS Pro increased. Shopify Plus contributed $29.8million, or 29% of MRR, compared to 25% of MRR as at December 31, 2020.
  • GMV was $54.1 billion in the fourth quarter, an increase of $12.9 million or 31% over 2020’s fourth quarter. Gross Payments Volume 3 (“GPV”) increased to $27.7B, representing 51% of GMV processed in quarter. This compares with $19.1B, or 46% for the fourth quarter 2020.
  • Gross profit dollars increased 37% to $692.7million in the fourth quarter 2021, as compared to $504.4 million in 2020.
  • The fourth quarter 2021 adjusted gross profit 4 dollars increased 37% to $700.6million, compared to $510.6 million in 2020.
  • The fourth quarter 2021 operating income was $14.4million, or 1.0%, compared to the income of $112.5million, or 12%, in the same period last year.
  • The fourth quarter 2021 adjusted operating income 4 was $130.2million, or 9%, compared to the adjusted operating income of $200.0million or 20% in the fourth quarter 2020.
  • The net loss for the fourth-quarter of 2021 was $371.3million, or $2.95 per simple and diluted share. This compares with net income of $123.9million, or $0.99 for the fourth-quarter of 2020, which was $123.9 million. Q4 2021 net income included a $509.7million net unrealized loss on equity and other investments.
  • The fourth quarter 2021 adjusted net income 4 was $172.8million, or $1.36 per share. This compares with the fourth quarter 2020 adjusted net income of $198.8million, or $1.58 each diluted share.
  • Shopify had $7.77 Billion in cash, cash equivalents, and marketable securities as of December 31, 2021, compared to $6.39 Billion at December 31, 2020. This increase is due to $1.5 billion in net proceeds from Shopify’s Class A subordinate voting share offering in the first quarter 2021, and $0.5 billion net cash provided through operating activities. The purchase of equity and other investments was partially offset during 2021.
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Fourth-Quarter Highlights

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  • Shopify’s sales reached over $6.3 billion between the beginning of Black Friday in New Zealand and the end of Cyber Monday California. This is compared to more than $5.1 Billion in GMV for Black Friday Cyber Monday in 2020. Shopify bought enough carbon removal to eliminate all carbon emissions from shipping for every order placed on its platform during the Black Friday Cyber Monday period. This resulted in almost 60,000 tonnes of carbon emission offset.
  • Shopify Capital provided $323.7 million in merchant cash advances to U.S. and Canadian merchants. This represents a 43% increase over the $226.9million that was funded in the fourth-quarter of 2018. Shopify Capital now has $3.0 billion of cumulative capital, approximately $470.7 Million of which is outstanding as of December 31, 2021.
  • Shopify was named #1 in G2’s Crowd Grid of E-commerce Platforms for Winter 2022, and has remained at the top for seven consecutive years.

Full-Year Financial Highlights

  • The total revenue for 2021 was $4611.9 million. This is 57% more than 2020. Subscription Solutions revenue increased 48% to $1.342.3 million and Merchant Solutions revenue rose 62% to $3.269.5 million.
  • GMV 1 was $175.4 Billion in 2021, a 47% increase over 2020. The GPV 3 increased to $85.8billion, representing 49% of GMV processed, compared to $53.9billion or 45% for 2020.
  • The gross profit increased 61% to $2481.1 million in 2021 compared to $1,541.5 millions for 2020.
  • The adjusted gross profit 4 increased 60% to $2,509.2 millions in 2021, as compared to $1,568.5million in 2020.
  • For 2021, operating income was $268.6 millions, which is 6% of revenue. In 2020, operating income was $90.2 million or 3% of revenues.
  • For 2021, adjusted operating income 4 was $718.0million or 16% of revenues; for 2020, adjusted operating income was $437.4million or 15% of revenue.
  • For 2021, net income was $2,914.7 millions, or $22.90 per share. This compares to 2020’s net income of $319.5million, or $2.59 for each share. The 2021 net income includes $2.9 billion in unrealized equity gains.
  • For 2021, adjusted net income 4 was $6.41 per share. This compares with the adjusted net income of $3.98 per share for 2020, which was $491.3million.
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2021 Highlights

Shopify’s mission to make commerce more accessible for all was furthered in 2021. Shopify makes it easy for merchants and customers to connect with each other, increase their brand equity, and reach more buyers. Shopify also continues to develop a sustainable internet infrastructure to commerce. This simplifies commerce operations so that merchants can concentrate on what is most important to them.

  • Shopify has introduced TikTok shopping to merchants. Merchants can add products directly to their online shop checkout by opening a TikTok for Business account.
  • Shopify has launched the Spotify channel. This allows artist-entrepreneurs using Spotify to connect their Spotify for Artists accounts to their Shopify online shops. They can then sync their product catalogs and showcase products seamlessly on their Spotify profile.
  • Shopify has launched its new integrated retail hardware that accepts payments from retail merchants in the U.K, Ireland, Australia and New Zealand. This was followed by Belgium in January and Spain February 2022. Shopify now offers POS hardware in eleven countries.
  • Shopify has expanded Shop Pay’s accelerated checkout to Shopify and other merchants on Facebook, Instagram and completed integration of Shopify Payments and Buy on Google. This allows customers to shop at Shopify merchants, then checkout on Google. This will pave the way for Shop Pay on Google to launch in the first half 2022. Shopify’s introduction of Shop Pay allows merchants to provide frictionless and fast checkout to customers via these platforms, which in turn helps to increase sales conversion.
  • Shopify introduced Shop Pay Installments to all U.S. merchants, giving merchants greater flexibility and affordability when it comes to checkout. Merchants also have significant benefits from our buy-now-pay later product. This includes access to the largest U.S. consumer network through Shop Pay. A seamless checkout experience with higher conversions and order values, lower abandoned carts and direct integration with Shopify merchant stores.
  • Shopify has continued to develop Shop, our all in one digital shopping assistant. It added rich features and functionality to offer buyers a pleasant end-to-end shopping experience. This includes an analytics dashboard, automated marketing tools to support merchants sales efforts, in app cart and checkout with ShopPay Installments or Shop Pay Pay, as well as curated discovery filters.
  • Shopify has introduced new upgrades to its online shop, including Online Store 2.0. This allows merchants to showcase their brands and create unique online experiences. It also integrates apps without having code.
  • Shopify started rolling out Shopify Balance to US merchants. This money management product offers merchants fast access to their cash and a card that can be used online, on mobile or in-store. It also rewards them with cash back, perks and discounts for every day business spending.
  • Shopify launched Shopify Markets to make cross-border commerce more accessible for entrepreneurs. It began rolling out to merchants in January 2022. Shopify Markets allows merchants to easily enter new markets and increases buyer trust with customized experiences tailored for each market. Shopify Markets allows merchants to have a single view of their entire business, regardless of where it is located.
  • Shopify launched Shopify Shipping for merchants in the U.K. This allows them to purchase shipping labels from the Shopify merchant admin. It saves merchants time, money, and effort.
  • Shopify has continued to develop the core features of Shopify Fulfillment Network. This allows merchants to offer fast, simple fulfillment that will allow them to delight customers. The key features include staff notifications, demand forecasting and critical alerts. We opened an Atlanta self-operated, leased warehouse, where we started fulfilling Shopify merchant orders this fall. This location also served as a testing ground for fulfillment software, which was used to unify the network of Shopify merchants and improve their connection with Shopify.
  • Shopify has launched the Shopify Global ERP Program. This program allows selected ERP partners (initially including Microsoft, Oracle NetSuite and Infor), to integrate directly into the Shopify App Store. This program allows high-volume merchants to create seamless workflows and more data control, which will help them transform their data into actionable results.
  • Shopify offered more generous terms to its developer partners in order to attract top developers around the globe to improve commerce. Shopify began eliminating its revenue share from the first million dollar made annually by app developers partners in the Shopify App store. Shopify also eliminated the revenue share for the first million dollar made annually by theme developers in the Shopify Store on September 15, 2021.
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Shopify invests from its Sustainability Fund to support the most promising and effective technologies that will reduce the environmental impact of its operations and combat climate change. Shopify announced that it has purchased more Direct Air Capture carbon removal (i.e.,.) in 2021. This will offset all carbon emissions from orders placed on the Shop app and all orders placed on the Shopify platform over the Black Friday Cyber Monday holiday shopping weekend. There is no underground storage of atmospheric carbon dioxide, unlike that used for enhanced oil recovery and other types of fossil fuel extraction. This milestone was achieved with the purchase of 10,000 tonnes of carbon dioxide removal from Carbon Engineering. It also adds to our previous commitment of Climeworks, which was 5,000 tonnes.

After the Fourth Quarter 2021

  • Shopify has launched JD Marketplace as part of its new partnership with JD.com. This channel unlocks the largest ecommerce market in the world for our merchants, giving them access and support to cross-border commerce. The new channel allows merchants to quickly sell, to fulfill orders from JD’s U.S. warehouses directly in China, to convert prices to local currency and to translate product descriptions and names. This opens up JD’s 550,000,000 active customers in China to this channel.
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2022 Investments

Shopify will invest further in the development of a world-class commerce infrastructure. This will allow merchants to sell from anywhere and scale their businesses, while creating delightful shopping experiences for customers. The following are the key investment themes for 2022:

  • Building buyer relations. We intend to expand ways merchants can connect with buyers, strengthen buyer relationships, seamlessly manage their businesses across more channels, offer memorable shopping experiences while still maintaining control over their brand. Shopify POS, social commerce and Shopify POS are our main channels. Focus areas include Shop Pay Installments and Shop Pay Accelerated Checkout.
  • Going global. This is about helping merchants succeed in local markets and reach customers worldwide. We plan to make it easier to scale and start businesses in countries outside North America by promoting Shopify’s visibility and commercial activities. Shopify Markets will make it easier for merchants to sell across-border.
  • From first sale to full scale. With our merchants, we are there with them every step of the way. We will continue to work on tools that make it easier for merchants at all stages to succeed. We will continue to focus on areas such as easier onboarding, Shopify Capital and Shopify Balance enhancements, as well as B2B offerings to scale merchants and the best network of partner apps to assist them at every stage of their journey.
  • Streamlining fulfillment. We’re leveraging all our experience to create simple and quick fulfillment. We consolidate our network into larger facilities. To improve quality and control cost, we are moving to own more. Finally, we unify the network by operationalizing our warehouse management software to integrate with Shopify’s backoffice and checkout. This will allow merchants to offer delivery promises and seamlessly fulfill them. Our Shopify outlook for 2022 will reflect our new, more direct approach. We expect Shopify Fulfillment network revenue, operating expenses, and capital expenditures to be the same.
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We will continue to invest in the future platform and business. This will increase the speed, resilience and security of Shopify’s core platform.

2022 Outlook

This outlook is forward-looking information as defined by applicable securities laws. It is based upon a variety of assumptions and is subject to a number risks. Shopify cannot predict what might happen, and actual results may differ materially due to a variety of factors. See “Forward-looking statements” below.

Shopify’s outlook assumes that the industry will continue to grow, that we can manage this growth effectively, and that there are no material changes to our industry or global economy. There are also other assumptions about the COVID-19 pandemic. These assumptions and factors are detailed below. These statements replace all previous statements by Shopify. They are based upon current expectations. These statements are forward-looking and may not reflect actual results.

These statements don’t reflect the possible impact of acquisitions, mergers, divestitures, or business combinations which may be announced or close after the date. These numbers are only estimates.

We believe that the COVID-driven changes in behavior by consumers and merchants in 2020 and 2021 have greatly increased the chances of entrepreneurship and digital commerce. These past two years have proven to be transformative for Shopify. Our GMV, revenue, and employee base have doubled since 2019, and nearly twice as many merchants are using Shopify to scale and launch their businesses. As the world continues to move beyond COVID, this momentum allows us to grow our goals for merchants in 2022.

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We expect continued secular tailwinds to drive entrepreneurship and digital commerce innovation in 2022, albeit against a more controlled macro environment than 2021. We believe that the COVID-triggered acceleration in ecommerce will not be present from 2022. There is also caution about inflation and consumer spending near term. However, we expect economic growth to support the continued penetration by ecommerce.

Our financial outlook for 2022 is based on these larger picture, secular and economic assumptions. We expect revenue growth to be lower than the 57% growth in 2021. However, it will still be rapid and outpace the growth of ecommerce. This is due to our many growth levers which include the expansion of our services in more countries, the increasing contribution of new products and our strong value proposition in multi-channel commerce, which allows independent brands of all sizes to have a strong presence online, in apps and in person.

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We expect the following for 2022:

  • Three factors are responsible for the lower year-over-year revenue growth in the first quarter 2022 and the highest in the fourth quarter 2022. First, we don’t expect the COVID-triggered acceleration in ecommerce in 2021 due to lockdowns or government stimulus to continue in 2022. Our new terms with theme developers and apps result in two changes from last year’s quarter. First, Shopify’s rev-share on the first million dollars of revenue each reset on January 1st. Second, Shopify’s shift from gross revenue recognition to net revenue recognition due to revised contract terms with our themes partners. These terms, which were not in effect until the second quarter of last year, will impact Subscriptions Solutions revenue in 2022’s first half, especially in the first quarter. Third, certain commercial initiatives as well as sales and marketing investments are expected to gain momentum in 2022.
  • Subscriptions Solutions revenue growth will be driven by more merchants joining the platform in 2021 than in 2021. We also introduce new commercial initiatives, and invest aggressively in sales and marketing in order to expand our market and penetrate more markets. In 2022, our goal will be to maximize our efforts to get more merchants onto the platform and to achieve success.
  • Merchant Solutions revenue growth will be twice that of subscription solutions revenue growth over the past year. This is because merchants are more likely to use our products and we expand existing products into new regions and offer new features such as Shopify Markets. Gross profit dollar growth will be accompanied by an increase in Merchant Solutions within our overall revenue mix.
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The transformation of retail to digitally empowered commerce has far-reaching implications. It includes new ways for merchants and customers to discover and retain buyers, new opportunities for commercial partners on social media, and a data-enabled revolution within shipping and logistics. Shopify plans to aggressively reinvest in our business throughout 2022, and deploy all gross profit dollars back into the company, keeping independent brands at the forefront. We expect to hire more engineers in research and development than we did in 2021, despite a highly competitive talent market. We are increasing sales and marketing by accelerating the hiring process, initiating an offline performance marketing program, and intensifying our international marketing efforts.

We expect capital expenditures to reach $200 million in 2022, as well as stock-based compensation expenses, and associated payroll taxes, of $800 million. Additionally, amortization of acquired immaterials will be $28 million.

Quarterly Conference Call

Shopify’s management will host a conference call today at 8:30 AM to discuss fourth quarter results. ET. The conference call will be webcast on the investor relations section of Shopify’s website at https://investors.shopify.com/news-and-events/. After the call ends, a replay of the webcast will remain available.

Shopify’s Audited Consolidated Financial Reports, along with the Management’s Discussion And Analysis, Annual Information Form, and Notes, for the year ending December 31, 2021, are available at www.shopify.com. They will also be filed on SEDAR www.sedar.com, and on EDGAR www.sec.gov. Shareholders can request a hard copy the audited financial statements.

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Shopify

Shopify is a trusted provider of essential internet infrastructure to commerce. It offers tools that can be used to launch, grow, market and manage any retail business. Shopify is a trusted platform that makes commerce easier for everyone. It offers services and products that are designed for reliability while providing a better shopping experience to consumers around the world. Shopify was founded in Ottawa and powers millions of businesses across more than 175 countries. It is trusted by brands like Allbirds and Gymshark as well as Tupperware, FTD and Netflix. www.shopify.com for more information.

Non GAAP Financial Measures

Shopify utilizes non-GAAP financial indicators to supplement our consolidated financial reports, which are prepared in accordance to United States generally accepted accounting practices (“GAAP”) to help investors understand our financial and operational performance.

Adjusted gross profit and adjusted operating income, adjusted net revenue and adjusted net loss per share are non-GAAP financial measurements that do not include stock-based compensation expenses, related payroll taxes, amortization and real estate-related impairment charges. Unrealized gains on equity or other investments, amortization discount for Shopify’s convertible senior note, and tax effects relating to non-GAAP adjustments are also excluded from adjusted net income and adjusted net loss per share.

Non-GAAP financial metrics are used internally by management for operational and financial decision-making, and to compare periods. Shopify believes these non-GAAP financial measures can provide useful information about operating performance, improve the overall understanding past financial performance, and help to evaluate future prospects. They also allow for greater transparency regarding key metrics that management uses in its financial and operational decision-making. Non-GAAP financial measurements are not accepted measures for financial statements presentation under U.S. GAAP. They do not have standardized meanings and may not be comparable with similar measures presented by public companies. These non-GAAP financial measurements should be considered as an addition to, not a replacement for, or superior, the GAAP-compliant measures. For a reconciliation of non-GAAP measures, see the financial tables below.

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